Wellman plans to emerge from bankruptcy by end of January

By Caroline Salls

Pittsburgh, Jan. 15 - Wellman, Inc. plans to emerge from Chapter 11 bankruptcy by the end of January as a subsidiary of a private company with a $35 million revolving credit exit facility, according to a company news release.

"This has been a long and difficult process," president and chief executive officer Mark Ruday said in the release.

"I would like to thank all of our customers, vendors, creditors, employees, directors, stakeholders and advisors for working with us so we can complete our reorganization and emerge from bankruptcy with a strong capital structure that will allow us to maximize the potential of our world class Pearl River PET resin facility in Hancock County Mississippi."

As previously reported, Wellman's plan of reorganization was approved Jan. 12 by the U.S. Bankruptcy Court for the Southern District of New York.

According to an 8-K filed with the Securities and Exchange Commission, the exit financing will be provided by CIT Group/Business Credit, Inc., CIT Bank and CIT Capital Securities LLC. CIT Group is acting as the administrative agent, and CIT Capital Securities is the sole arranger and sole bookrunner.

The exit revolver will mature three years from the plan effective date.

Interest will be either Prime rate plus 700 basis points or Libor plus 800 bps, subject to a 200 bps Libor floor.

Under the plan, Wellman Holdings, Inc., a private company, will become the parent of Wellman, Inc.

Plan sponsors Sola, Ltd. and BlackRock Financial Management, Inc. will invest $35 million in reorganized Wellman in exchange for common stock and $40 million of second-lien notes, which they will have the right to convert into 50% of the total outstanding common stock of the reorganized company.

The existing first-lien debtholders will convert their pre-bankruptcy debt into common stock and $36 million of third-lien notes, which can be converted into 30% of the total outstanding common stock of reorganized Wellman.

Existing second-lien debtholders will convert their debt into common stock and $24 million of third-lien notes, which can be converted into 20% of the total outstanding common stock of the reorganized company.

Wellman said proceeds from the plan sponsors and exit facility will be used to repay its debtor-in-possession credit agreement and pay deferred financing fees, administrative expenses, priority claims, cure payments and professional fees.

The holders of the company's first-lien debt will also receive the net proceeds from the sale of the company's facility in Darlington, S.C., and the second-lien debtholders will also receive 80% of the net proceeds of some of Wellman's legal claims that existed at the confirmation date, which will be deposited into a litigation trust.

The company's unsecured creditors will receive the remaining 20% of the litigation trust proceeds.

Wellman's preferred and common stockholders will not receive any distributions under the plan.

"Our financial foundation is strong and will provide us with sufficient liquidity to meet our customers' needs," Wellman chief financial officer Keith R. Phillips said in Thursday's release.

"We look forward to working with our new board of directors to maximize the value of the reorganized Wellman for our investors."

Wellman, a polyester products manufacturer based in Fort Mill, S.C., filed for bankruptcy on Feb. 22, 2008. Its Chapter 11 case number is 08-10595.

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